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RBI Cancels CoRs of Eight NBFCs

Opportunity India Desk
Opportunity India Desk Oct 13 2022 - 3 min read
RBI Cancels CoRs of Eight NBFCs
The cancellation of the NBFC licences comes days after the finance ministry last month said that to tighten the noose around platforms operating illegally in the country, the RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering.

The Reserve Bank of India (RBI) has cancelled four non-banking finance companies’ (NBFCs) certificates of registration (CoR) while four other NBFCs surrendered their CoRs to the central bank. Also, market regulator Securities and Exchange Board of India (SEBI) has also cancelled the certificate of registration of Brickwork Ratings India Pvt Ltd. 

The four NBFCs whose licences have been cancelled are SRM Properties and Finance Company Pvt. Ltd, North East Region Finservices Ltd, Sowjenvee Finance Ltd, and Opel Finance Ltd. SRM Properties and Finance Company is a Jaipur-based NBFC, which received its licence in 2002. North East Region Finservices, an Imphal-based company, received its NBFC licence on October 30, 2008. Bengaluru-based Sowjenvee Finance received its CoR in 1998, while Patna-based Open Finance was given the licence in 2002.

After the cancellation of CoRs, as such, these companies will not transact the business of an NBFC. The cancellation of the NBFC licences comes days after the finance ministry last month said that to tighten the noose around platforms operating illegally in the country, the RBI will monitor the ‘mule/rented’ accounts that may be used for money laundering. The RBI will also review or cancel dormant NBFCs to avoid misuse, it said.

The decision was taken during a meeting chaired by Finance Minister Nirmala Sitharaman to discuss the various issues related to “illegal loan apps” operating outside the regular banking channels.  Besides this, the four NBFCs that have surrendered their CoRs to the RBI are Ashwini Investment Private Ltd, RM Securities Pvt Ltd, Amity Finance Private Ltd, and Matrix Merchandise Ltd. Following this, the central bank has cancelled their CoRs as well.

New Delhi-based Ashwini Investment received its licence in 2002, while RM Securities, Amity Finance, and Matrix Merchandise received their CoRs in 2001, 2000, and 2008, respectively. As per the RBI, they are now not allowed to transact the business of an NBFC.

Separately, the RBI has informed that capital market regulator SEBI has cancelled the certificate of registration (CoR) of credit rating agency Brickwork Ratings India Pvt Ltd on October 6, 2022. The ratings agency has been directed to wind down its operations in six months and will not take any new clients or fresh mandates.

"Regulated entities or market participants are advised that in respect of ratings or credit evaluations required in terms of any guidelines issued by the Reserve Bank, no such fresh ratings or evaluations shall be obtained from the above-mentioned rating agency with immediate effect. The instructions regarding the prudential treatment of the existing ratings issued by the rating agency shall be advised separately," the RBI statement said. 

RBI last month had released a list of NBFCs in the upper layer under scale-based regulation. The framework envisages that the top 10 NBFCs in terms of asset size will reside in the upper layer. The NBFCs in RBI’s upper layer list are LIC Housing Finance, Bajaj Finance, Shriram Transport Finance Company, Tata Sons Private Ltd, L&T Finance, Indiabulls Housing Finance, Piramal Capital & Housing Finance, Cholamandalam Investment and Finance Company, Shanghvi Finance, Mahindra & Mahindra Financial Services, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial Services, Muthoot Finance, and Bajaj Housing Finance. 

Despite appearing in the list of top 10 NBFCs in asset size, HDFC Ltd was not included in the list of NBFC-UL due to the ongoing merger process.

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